Investing in telecom stocks can be a good strategy for investors looking to begin a passive income stream at a low cost. The telecom sector is relatively mature and recession-resistant, allowing companies to generate stable cash flows across market cycles. Moreover, telecom stocks offer shareholders an attractive dividend yield.
So, let’s see which TSX stock between Telus (TSX: T) and BCE (TSX: BCE) is a good buy right now. While Telus offers you a forward yield of 7%, BCE’s dividend yield is around 5.8%.
The Canadian telecom giants have adopted different strategic approaches in response to challenging industry conditions, creating a compelling investment comparison for dividend-focused investors. Let’s dive deeper.
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BCE just announced a dividend cut
Last month, BCE announced it would reduce its annual dividend to $1.75 per share from $3.99 per share due to an elevated and unsustainable payout ratio. It now aims to maintain a payout ratio between 40% and 55%, providing it with the flexibility to lower balance sheet debt and target organic growth investments.
BCE expects to achieve a net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of approximately 3.5 times by 2027, with a long-term goal of improving it to 3 times by 2030.
In contrast, Telus maintained its dividend growth trajectory, announcing a 7% increase and extending its multiyear dividend program through 2028 with targeted annual growth of 3% to 8%. It reported strong Q1 results with 22% free cash flow growth and currently maintains a net debt-to-EBITDA ratio of 3.9 times, targeting a multiple of three times by 2027.
BCE’s growth strategy centres on its U.S. expansion through the acquisition of Ziply Fiber and the innovative Network FiberCo partnership with PSP Investments. This joint venture will target up to six million fibre passings, enabling Ziply to reach eight million locations over time while reducing BCE’s capital contribution. It also continues cost transformation initiatives, expanding savings targets to $1.5 billion by 2028.
Telus demonstrates stronger operational momentum with industry-leading customer additions of 218,000 in Q1 and best-in-class mobile churn of 0.84%. Its diversified growth portfolio includes TELUS Health, which achieved impressive 12% revenue and 30% EBITDA growth, while TELUS Agriculture & Consumer Goods grew sales by 20% year-over-year. The recent acquisition of Workplace Options strengthens the health platform’s global reach, covering over 160 million lives.
What next for BCE and Telus stock?
For conservative dividend investors, BCE offers a reset foundation with enhanced financial discipline and a clear deleveraging path, though at the cost of reduced immediate income. The Ziply expansion provides significant long-term growth potential in favourable U.S. markets.
Telus appeals to investors seeking consistent dividend growth backed by operational excellence and diversified revenue streams. Its stronger fundamentals, industry-leading customer metrics, and promising health and agriculture businesses position it well for sustained performance.
While BCE may offer better long-term value following its strategic reset, Telus currently provides superior operational execution and dividend reliability, making it the more attractive near-term investment for income-focused shareholders.
Analysts tracking Telus expect the dividend stock to gain 4% over the next 12 months. After accounting for dividends, cumulative returns could be closer to 11%. Comparatively, Bay Street estimates that BCE stock will gain around 13%, given consensus price targets, indicating that cumulative returns could be closer to 19%.
